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Retail

Dollar stores thrive in pandemic, but hold back forecasts

FILE PHOTO: A sign is seen outside a Dollar General store in Chicago, Illinois, U.S. May 23, 2016. REUTERS/Jim Young/File Photo

(Reuters) - Dollar General Corp reported better-than-expected quarterly results on Thursday, as the discount retailer benefited from higher demand for cheaper groceries and household items during the coronavirus-induced economic downturn.

High unemployment and falling household income this year due to the COVID-19 crisis have boosted demand for lower-priced cereals, vegetables and other essentials, lifting sales at dollar stores.

The strong demand also carried through to the current quarter, with Dollar General reporting same-store sales growth of about 14% for the period between Oct. 31 and Dec.1.

Still, the company did not provide a forecast for the rest of the year, like its peer Dollar Tree, citing the uncertainty caused by the pandemic.

Shares of Dollar General, which typically sells products for $10 or less, were down nearly 3% in premarket trading after having risen about 40% so far this year.

Dollar General has stores concentrated in rural locations, which makes them a one-stop place for customers - who have few other options nearby - to buy everything from home decor, party supplies to everyday essentials.

For the third quarter ended Oct. 30, Dollar General posted sales and same-store sales that beat analysts’ expectations as people bought more on average despite cutting down on the number of trips.

Net income rose to $574.26 million, or $2.31 per share, from $365.55 million, or $1.42 per share, a year earlier.

Analysts on average were expecting a profit of $2.00 per share, Refinitiv IBES data showed.

Reporting by Mehr Bedi in Bengaluru; Editing by Arun Koyyur, Aditya Soni

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